Are Form 1120 Schedule M 3 Fines 2019-2024

Forms not being filled out properly is the main reason for the imposition of fines. The fines primarily originate from situations where business owners participate in certain plans, such as the so-called 419 plan or captive insurance in section 79 plans, which the IRS may deem abusive. These plans require the business owner to file an 8886 form with each tax return, regardless of whether they made a contribution in that particular year. Failure to file the form subjects the business owner to an additional fine, amounting to 75% of the claimed tax benefit or $10,000 per year on the corporate level, and $5,000 per year on the personal level. If the form is not filed initially, it can still be submitted afterwards. However, there are specific instructions from the IRS for filing after the fact, and many accountants may not be aware of them. This often leads to incomplete filings or forms being left out entirely, which can result in accusations of dishonesty towards the IRS or non-compliance. Consequently, these failures to file the forms correctly contribute to the additional monetary penalties. Some attorneys refer to this as a "troll toll" until the fine is resolved, while others opt to proceed directly with a lawsuit. Ultimately, the substantial fines are largely a consequence of the failure to file the required forms, despite the fact that only a small number of accountants are knowledgeable about this issue.